Another Bitcoin exchange goes down

Bitstamp, the largest Bitcoin exchange in the world, is under attack and has halted withdrawals.

The world's largest Bitcoin exchange, BitStamp, says it has fallen victim to a cyber attack and has halted customer withdrawals.

That makes Bitstamp the second major Bitcoin exchange in a week to prevent customers from withdrawing their money and blaming a technical glitch. Bitstamp and Mt.Gox together house 52% of the bitcoins that trade hands, according to currency trackers at BitcoinCharts.

Since Bitstamp announced the attack Wednesday afternoon, Bitcoin prices have fallen by more than 4% to $640.

Bitstamp said the problem was caused by a denial-of-service attack, the kind in which attackers flood servers with an overwhelming amount of traffic, causing a system to overload. Bitstamp was unable to process withdrawals consistently.

The Slovenia-based company said it won't resume processing Bitcoin withdrawals and deposits until it fixes the software problem.

"No funds have been lost and no funds are at risk," the company assured in a statement.

On Friday, Mt.Gox, another major Bitcoin exchange, said it was halting withdrawals until it fixed a software glitch. It has yet to reopen.

Bitcoin values have tumbled since then. The price was above trading as high as $831 on Feb. 6.

Nicolas Cary, whose startup Blockchain developed a Bitcoin digital wallet for smartphones, said the event was "simply a stress-test for Bitcoin and the community," which is working together to solve the problem.

But Edward Harrison, who runs the financial blog CreditWritedowns, said he worries for the many who can't access their money and what it means for currency's future.

"It shows you that the whole Bitcoin system is not quite ready for prime time," he said.